Updated 2 min read
Table of contents
At Policygenius, we use several factors — including third-party rating groups — to determine our best life insurance company recommendations. Moody’s Investors Service, founded in 1909, provides ratings and reviews of Insurance Financial Strength, the ability of insurance carriers to pay claims.
Here’s how Moody’s ratings work and how you can use them to help choose your life insurance provider.
Moody’s rates companies’ financial strength based on their ability to repay short and long-term debts.
Short-term ratings range from P-1 to NP (best to worst) and Aaa to C for long-term ratings.
Policygenius uses Moody’s ratings to inform our editorially independent reviews of life insurance companies.
Along with Standard & Poor’s and Fitch Group, Moody’s is among the largest credit ratings agencies in the world, and a respected source for analysis of the financial strength of banks, money markets, bond funds, and insurance companies. The U.S. government also uses it for regulatory purposes.
Moody’s ratings help investors — and anyone trusting a life insurer with their family’s financial protection — judge the stability and creditworthiness of financial institutions.
That's why you should also look at the financial stability of a life insurance carrier, to ensure that your family will receive a death benefit after you’re gone.
Moody’s rates carriers according to a detailed "creditworthiness scale." Basically, that means they weigh the outstanding debts and other financial risks of national life insurance companies. Knowing a company’s Moody’s ratings, along with other third-party credit ratings, can help you confirm an insurer’s financial reliability — and that can help you decide what carrier to choose.
Moody’s uses a multi-pronged rating system to determine a carrier's financial strength.
The ratings process includes four steps: 
Company applies for a rating and Moody’s assigns an analytical team to the company
Company’s management presents company information to Moody’s analytical team
Analytical team submits proposed rating to committee for a review and approval vote to ensure integrity and consistency
Rating is shared with the company and in a press release by Moody’s
The ratings review accounts for an insurance company's short- and long-term financial risk.
Ready to shop for life insurance?
Moody’s short-term ratings are based on an insurance company’s ability to repay short-term debt obligations. Moody’s defines "short-term debts" as obligations due for repayment in under one year.
|Moody's designation||Ability to repay short-term debts|
Moody’s long-term ratings are based on an insurance company’s credit risk of fixed-income obligations. These ratings reflect the possibility that a life insurance benefit payout may or may not be honored as promised.
|Moody's designation||Ability to repay long-term obligations|
|Aaa||Highest quality, minimal risk|
|Aa||High quality, very low credit risk|
|A||Upper-medium-grade, subject to low credit risk|
|Baa||Medium-grade, moderate credit risk, may possess speculative elements|
|Ba||Substantial credit risk, with speculative elements|
|B||High credit risk, considered speculative|
|Caa||Very high credit risk, poor standing|
|Ca||In or very near default, highly speculative, some prospect of recovery in principal and interest|
|C||Typically in default, with little prospect for recovery of principal and interest|
Long-term ratings may come with a 1, 2, or 3 added to the letter rating, which indicates how highly within its letter category a company ranks. A company rated Baa1 is less risky than one rated Baa3.
Ready to shop for life insurance?
Policygenius takes a comprehensive approach to determine the best life insurance companies available. We don't get paid for reviews and evaluate an extensive rubric of criteria to come up with robust, unbiased reviews to match you with the right life insurance carrier.
Moody’s ratings factor into our Financial Confidence category: consumer confidence based on scores from major financial rating institutions. We normalize ratings from Moody’s, Standard & Poor’s, and A.M. Best, to give companies a score out of 10.
Moody’s ratings scale for life insurance companies ranges from P-1 to NP (best to worst) for short-term debts and Aaa to C for long-term debts.
An analytical team assesses a company’s creditworthiness and assigns a rating, which is approved by a review committee to ensure integrity and consistency across ratings.
Moody’s ratings indicate how much you can trust a company to pay its debts — like the payout on your life insurance policy. Choosing a financially stable insurer can provide peace of mind that your family will receive the financial protection you paid for.